The Irish start-up scene is a rapidly growing space. Driven by entrepreneurs and supported by government organisations like Enterprise Ireland & local start-up groups around the country, the start-up community in Ireland is expanding year on year. While start-ups can have the skill, drive and the experience in their particular area to make it work, there is one area that many self-employed business owners, new and old, can find quite daunting – the complicated world of Irish tax returns. While PAYE workers usually have their tax deducted at source from their employer, if you are what is referred to as a ‘chargeable person’, you are responsible for ‘self assessing’ your due tax by the 31st October each year. To help you better understand how to approach your tax return, the experts at Selfemployed.ie have put together a short list of their top tips.
- Be organised, be ready and don’t be late
Under self-assessment there is a common date for the payment of tax and filing of tax returns – the 31st of October each year. With all the demands of starting a new business, this date can often sneak up on you. It is absolutely vital that you are ready for this date each year and have everything you need optimally organised to make the process as easy, quick and pain-free as possible. You can file your return in advance of this date once you are ready. Do not leave it until the last minute to file your return. Not only are there fees for missing the deadline, if you rush there is more chance that you make a mistake or leave something out, which can also result in a financial penalty or even a potential tax audit.
- The Start Your Own Business Relief
There are a number of tax reliefs, deductions and exemptions in place that contribute towards the creation of jobs. The start your own business relief provides tax relief for someone who has been unemployed for at least 12 months before starting a qualifying business, and provides an exemption from income tax up to a maximum of €40,000 per annum for a period of two years.
- Keep receipts and records of all your relevant expenses
Once an expense is directly related to the running of your business, you can make a claim for it in your sole trader tax return. However, you must be able to prove that you have made the expense by keeping all relevant receipts and a record of them, for six years. “Allowable expenses” for the day-to-day running of your business include items such as: the purchase of goods for resale, rent, rates, repairs, lighting, heating, the running costs of vehicles or machinery used in the business, accountancy fees, interest paid on any monies borrowed to finance your business, lease payments on vehicles or machinery used in the business, equipment, motoring expenses and commuting expenses. Things like mobile phones and cars can be a tricky area as many sole traders use them for their own personal use as well. Only the usage that is directly related to the running of the business can be claimed.
- Don’t overlook your pre-trading expenses
Because you’ve only recently launched your business, you may be eligible to claim a tax deduction for some qualifying pre-trading expenses in respect of the business in the three years before the commencement. For tax purposes, these expenses are treated as if they had been incurred at the time that the trade started. These may include business-related costs like: leasing costs, legal fees, the cost of preparing business plans and feasibility studies, accountancy fees, advertising costs and rent paid for the premises from which your business operates.
- Broaden your understanding of allowances
While the reliefs available to you when doing your income tax return are enough to keep you busy, there are other assets for which you may be entitled to claim a tax deduction for. If you look hard enough, they can make a big difference when getting your new business off the ground. Things that can easily be overlooked include things like intellectual properties your company may have acquired such as trade names, brands, know-how copyright and even good will, assets the cost of which qualify for tax relief; research and development costs; and even tax treatment on any losses you incur.
About the Author
Selfemployed.ie have over 25 years experience helping people through their self-assessment and income tax returns. So, if you are self-employed, involved in a start-up, working on a contract basis, or earning any other second income and need any help with any aspect of filing your income tax return, you can get professional, experienced income tax service starting from just €150 (+VAT). Get in touch with the experts today to get started.